As a business looking to sell your products or creations, forming a Limited Liability Company (LLC) in Arizona can be a smart business move. Here are five compelling reasons why:
- Credibility: Having an LLC can make your art business appear more professional and established, which may attract more customers and opportunities.
- Simplicity: Arizona has relatively straightforward requirements for forming and maintaining an LLC, making it an accessible option for entrepreneurs who may not want to deal with complex business structures.
- Perpetual Existence: An LLC can continue to exist even if you decide to step back from active management, allowing for easier transfer or sale of the business in the future.
- Tax Flexibility: LLCs offer flexibility in how you’re taxed. You can choose to be taxed as a sole proprietorship, partnership, or corporation, depending on what’s most beneficial for your situation.
- Simplified Sales Tax Collection: As an LLC, you can obtain a single sales tax license for your business. This makes it easier to collect and remit sales tax on your art sales, which is particularly important if you’re selling across multiple locations in Arizona or online. (Additionally, if you get a TPT number, you can buy raw materials without paying sales tax)
- Personal Asset Protection: An LLC separates your personal assets from your business liabilities. If your art business faces legal issues or debts, your personal savings and property are generally protected.
Below you will find the general steps to manually create an LLC in Arizona (free of charge), but before that, let me say that there are several online services that can handle most of the paperwork for you at a fraction of the cost of an attorney.
These services can help you file your Articles of Organization, obtain an EIN, and even create an operating agreement. They often offer tiered packages with additional features like expedited filing, compliance alerts, and business website services. While using these services can save you time and money, it’s important to note that they are not a substitute for legal advice. For complex situations or specific legal questions, it’s still advisable to consult with a qualified attorney.
Using any of these services, you can do it for about $150-$400 (which includes the required State filing Fee: $85.00)
Here are three popular options:
My favorite is the Mark Cuban’s (Shark Tank) endorsed company: Zen Business (https://www.zenbusiness.com/) because of their affordable pricing, user-friendly and simple registration platform, excellent customer support and ongoing compliance assistance if you want.
Other popular companies include LegalZoom, Bizee (by incfile), NewLLC Company and others.
The ONE caveat I will mention is carefully review the opt-in services they provide, as many are not necessarily needed. I find the basic plans are most suited for most situations.
Now let’s walk through the steps to create your LLC in Arizona:
General MANUAL Step to create an LLC in Arizona
- Choose a Name for Your LLC
- Ensure the name is unique and not already in use in Arizona
- The perfect business name can be challenging to select! You should choose a name that represents your product or services, while being memorable, and positively engaging your buyers. Your chosen business name must be unique and distinguishable from other business names in the state you register in.
- To search if a name is already taken go to the AZ State database at: https://ecorp.azcc.gov/EntitySearch/Index
- When you register, the name will need to include “LLC,” “L.L.C.,” or “Limited Liability Company”
- (Please make sure the name does not contain any special characters like quotes or apostrophes)
- Ensure the name is unique and not already in use in Arizona
- Decide on a Statutory Agent
- This person or company will receive legal documents on behalf of your LLC
- Can be yourself, a friend, or a professional service
- File Articles of Organization
- You need to file the “Articles of Organization” form with the Arizona Corporation Commission (ACC)
- (Regular LLC sample here or non-profit sample here
- This form can be obtained from the ACC website or offices The form typically includes:
- The LLC’s name
- Address of the LLC
- Name and address of the statutory agent
- Management structure (member-managed or manager-managed)
- Names and addresses of managers or members (if applicable)
- Signature of the organizer
- Filing can be done in three ways:
- a) Online: Visit the ACC eCorp website (https://ecorp.azcc.gov/)
- b) By mail: Send the completed Articles of Organization form to: Arizona Corporation Commission Corporate Filings Section 1300 W. Washington St. Phoenix, AZ 85007
- c) In person: At the ACC offices in Phoenix or Tucson Pay the required filing fee (check current rates on the ACC website)
- Pay the required filing fee (check current rates on the ACC website)
- You need to file the “Articles of Organization” form with the Arizona Corporation Commission (ACC)
- Create an Operating Agreement
- While not required by Arizona law, an operating agreement is a crucial internal document that outlines how your LLC will be run. This especially important if you have multiple members in your LLC
- An operating agreement typically includes ( See example here) :
- The LLC’s management structure
- Rights and responsibilities of members
- Voting procedures
- Profit and loss distribution
- Rules for meetings and voting
- Procedures for admitting new members or handling member exits
- Who needs to see it:
- All LLC members should review and agree to the operating agreement
- It’s an internal document, so you don’t need to file it with the state
- For an example of what an operating agreement might look like, you can refer to template
- Note that. while templates can be a helpful starting point, it’s advisable to customize your operating agreement to fit your specific business needs and to have it reviewed by a legal professional.
- Obtain an EIN (Employer Identification Number)
- An EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States.
- You’ll need this for tax purposes and to open a business bank account
- You can obtain an EIN for free directly from the IRS in the following ways: a) Online: The fastest method is to apply online through the IRS website: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
- The online application is available Monday through Friday, 7am to 10pm Eastern Time.
- You’ll receive your EIN immediately upon completion of the online application.
- Apply for Necessary Licenses and Permits
- Depending on the nature of your business and your location in Arizona, you may need various licenses and permits
- Transaction Privilege Tax (TPT) License:
- This is Arizona’s version of a sales tax license. and it required if you’re selling tangible goods (like paintings, sculptures, prints).
- Apply through the Arizona Department of Revenue (ADOR) website: https://azdor.gov/transaction-privilege-tax/tpt-license/applying-tpt-license You can also find more information about TPT on their FAQ page
- City or County Business License: these are often required and vary by location.
- Open a Business Bank Account
- Keep your personal and business finances separate
- File Your Annual Report
- Arizona requires LLCs to file an annual report to maintain good standing
Remember, while these steps are generally straightforward, it’s always a good idea to consult with a legal or business professional to ensure you’re setting up your LLC correctly for your specific situation.
By creating an LLC, you’ll be well on your way to protecting your assets and professionalizing your business.
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